Israel Preparing for Tough Bargaining for U.S. Financial Aid After Treaty is Signed with Egypt

February 22, 1979

JERUSALEM (Feb. 21)

Senior Treasury officials are preparing for tough bargaining over American financial support for Israel after a peace treaty is signed with Egypt Amiram Sivan, director general of the Finance Ministry, will leave for the United States in two weeks, accompanied by a senior representative of the Defense Ministry to follow up the talks here last week with Defense Secretary Harold Brown.

Israel reportedly succeeded in obtaining American agreement to finance part of the costs of the expected withdrawal from Sinai and redeployment of forces in the Negev. The U.S. currently is offering Israel the same financial assistance it has offered in the past fiscal year — $1.785 billion. Of this amount, $1 billion is for defense needs and the balance for civilian purposes. Israel asked for $2.4 billion in the next fiscal year of which $1.5 billion would be for military purposes and the rest for civilian projects.

These sums represent the regular annual financial assistance Israel receives from the U.S. However, the main bargaining will be over the special assistance Israel has requested in connection with the implementation of the Camp David agreements. Israel’s latest request in that category alone involves $3 billion.

The Israelis have dropped the sum of $300 million they initially asked to pay for removing the Israeli settlements from Sinai. The Americans made it quite clear from the start they were unlikely to finance the removal of settlements the very founding of which they had opposed.

MEMO SUBMITTED TO THE U.S.

A recent memorandum submitted to the U.S. specified that $2.25 billion was required to build new military airfields in the Negev. The rest will go toward the purchase of specific military equipment which would compensate the army for operating in a terrain which is inferior strategically to the Sinai peninsula. But here, too, there is a different American view.

The Americans reportedly estimate the costs of the new airfields in the Negev at not more than $1 billion. Israel claims that this does not take into account the infrastructure involved in the new building. In effect, Israel’s economic planners say, Israel will have to build in the Negev in three years an entire military system which was built in the Sinai over a period of 11 years.

Another debate is expected over the ratio between loans and grants in economic assistance from the U.S. Premier Menachem Begin said during his last visit to the U.S. that Israel did not expect grants, merely loans. But the government apparently had second thoughts and Israel now insists that a greater part of the assistance be in the form of grants. Israel points to its national debt of $12 billion and claims that it is going to be quite difficult to increase its out standing loans.